Appliance retailers face 2012 downturn

SHANGHAI - With the nation's home-appliance replacement scheme set to expire, customers have been rushing to the stores to catch the last chance to buy cheaper goods.

On Dec 23, the Ministry of Commerce announced on its website that the two-year-old scheme will end on Dec 31.

Figures provided by Gome Electrical Appliances Holding Ltd show that the sales volumes of appliances under the home-appliance replacement scheme increased by more than 200 percent in December, compared with the previous month.

"We've seen a rapid increase in sales of electrical appliances since the beginning of the month and many stores have arranged to have more staff members on duty and extended working hours to meet the higher customer demand," said He Yangqing, Gome's director of public relations.

The scheme, aimed at spurring domestic consumption and curbing pollution, was launched in June 2009 and helped to lift the sales revenues for home appliances in the past 11 months to more than 180 billion yuan ($28 billion), according to the latest statistics from the Ministry of Industry and Information Technology.

Under the scheme, buyers in nine provinces and cities including Guangdong province, Beijing and Shanghai, received a subsidy worth 10 percent of the retail price of five kinds of appliance: TVs, refrigerators, washing machines, air conditioners and computers.

However, the end of the scheme is likely to result in a decrease in sales of electrical appliances next year, according to analysts.

"Although current sales of electrical appliances seem to be very positive, benefiting from the scheme, the market will become less profitable after the expiry of the scheme, especially at the beginning of 2012," said Han Jianhua, secretary-general of the Shanghai Household Appliances Association.

Han added that manufacturers and retailers would be well advised to lower their sales targets for 2012 in the face of the predicted decline in demand.

From the perspective of the domestic retailer, Suning Appliance Company Limited still has optimistic expectations for demand in the coming year, despite the cessation of the scheme.

"The expiry of the scheme won't do dramatic damage to sales of our electrical products, as customers such as newly weds and people moving into new homes and upgrading their equipment will make up for the shortfall," said Wang Zhe, deputy executive officer of Suning's sales department.

Wang added that a subsidized home-appliance purchasing scheme in rural areas hasn't reached its expiry date and would attract more consumers from those areas.

"The local electrical retailers have to exploit the final day of the scheme and sell as many products as they can," said Zhu Qinghua, an analyst from CIC Industry Research Center.